Mental health authorities deemed him to be low risk, with the right supervision.

The prosecution were worried about the little regard he'd shown for his flatmate and sought for a bail condition which would require Millar to attend the Caloundra police station regularly.

Mr McLaughlin disagreed and said regular visits to the police station could be quite difficult for someone with mental health issues.

"It speaks really of nothing more than derangement on his part at that time," Mr McLaughlin said.

Millar had been released from the mental health ward into the watch house on Friday, ahead of Monday's bail application, something his lawyer had been trying to avoid happening.

Mr McLaughlin granted Millar's bail on the conditions that he lived with his father at Second Ave, Caloundra, complied with any treatment orders and allowed Queensland Health to provide police with updates and information about his treatment.

His committal mention was scheduled for March 29 at 9am, although it was indicated they were still waiting on forensic reports from the fire and Millar's matters may proceed through the Mental Health Court and could be delayed extensively in future.